8 May 2018

Within the fleet industry, company cars have always been the go-to benefit for employee packages. However, if a vehicle wasn’t provided then a cash allowance was the alternative. A specified sum of money, subject to tax, is given to the employee to spend on a new vehicle or for the upkeep of their existing vehicle.

However, for organisations looking to reduce their outgoings or scale back their fleet, this isn’t always a viable option. That’s why this month we wanted to explore some of the alternatives to company cars, along with the benefits and challenges that each option includes. 

Daily and short-term rental

This might seem like an obvious choice, but daily or short-term rental agreements are still an extremely viable alternative to traditional company cars. Instead of employees being given a business vehicle at the start of their contract, a hire care is provided instead.

Not only does this help to reduce the environmental impact of constantly running an extensive fleet, it also helps organisations to budget accordingly. If they know in advance that a short-term rental is needed, they can factor this into their monthly expenditure reports.

The benefits of daily or short-term rental

  • Fleet managers and senior management are able to forecast and budget their expenditure based on the requirements of their drivers
  • The choice of vehicle greatly increases, meaning fleet managers are able to select a vehicle based on the requirements of the journey, including commercial or specialist vehicles
  • Costs are priced into the agreement, so there are no maintenance fees involved with daily or short-term rental

The challenges of daily or short-term rental

  • Fleet managers may be charged more if the daily or short-term rental vehicle is booked at short notice, making it less suitable for unscheduled requirements
  • Excess mileage charges may be applied if the driver goes over the allocated amount, meaning that diversions or delays can come with an additional cost
  • The vehicle will usually have to be returned back to its original location, unless a collection service has been pre-arranged with the rental company

Car sharing arrangements

Similar to pool cars, car-sharing arrangements can be made either via online networks, or internally within an organisation. Employees will be able to post details of any business journey that they need to make and anyone needing to travel in the same direction will be able to share the ride.

However, it’s important that employers and fleet managers check with their insurance company first before giving this arrangement the go-ahead. There may be limits or restrictions on using personal vehicles for business use.

The benefits of car sharing

  • Having a selection of pool cars available means that you’re reducing your overall carbon emissions
  • Fuel expenditure is minimised, since several employees are sharing one vehicle
  • It helps to enhance employee morale, since they’re regularly sharing a space with their colleagues

The challenges of car sharing

  • Employees all have to travel together at the same time, reducing the benefits of flexible work hours
  • There is still a risk to employee safety, especially if the driver isn’t used to having passengers in the vehicle
  • Fleet managers or employers may have to adjust their insurance policies to cover multiple employees in one vehicle

Plug-in Hybrid (PHEVs) and Electric Vehicles

Plug-in hybrid and electric vehicles can be a good alternative to their petrol or diesel counterparts.

Furthermore, utilising them in combination with a pool car or car sharing scheme means that you’re improving your environmental credentials whilst still reducing the overall costs of running your fleet.

The benefits of PHEVs and EVs

 Your environmental credentials will be greatly enhanced since driving these vehicles on shorter journeys reduces your carbon emissions

  • PHEVs and EVs are relatively inexpensive to run, especially if the driver is regularly undertaking 15-20 mile trips
  • Most PHEV and EV models now come with a higher technology specification such as variable strength braking energy recuperation, helping to increase the fuel efficiency and minimise driving costs

The challenges of PHEVs and EVs

  • Even though more manufacturers are branching out into PHEVs and EVs, there is still a relatively narrow model range, meaning that employees are limited in choice if this option is offered
  • Typically, there are higher costs involved with offering PHEVs and EVs compared to the traditional vehicles with internal combustion models
  • Drivers may suffer from range anxiety, especially if they’re undertaking a longer journey and there isn’t a charging point en-route
  • There are set-up costs involved when installing new charging systems, and each vehicle will come with its own unique charging times

In conclusion, each of these alternatives provides plenty of benefits to companies who aren’t, or don’t want to, offer company cars as an employee benefit. We would suggest proceeding with care and thought, as employees can see a company vehicle as a deciding factor in their choice of employer.

To find out more about our fleet management and leasing, employee benefits solutions and driver services, call a member of our team on 0844 854 5100 or email CSalmon@sgfleet.com.